Spain's GDP likely contracted in the last three months of the year, confirming predictions made this week by Economy Minister Luis de Guindos, the Bank of Spain said Thursday.
The Spanish economy suffered losses due to the strong market rumbles and the negative outlook to growth in the euro zone, the central bank said in its monthly economic bulletin.
"After the Spanish economy stalled in the third quarter, the preliminary data available [...] point to a contraction of activity in the last months of the year," the bulletin reads.
Weaker exports and lower consumption have contributed to the weakening of Spain's economy in the fourth quarter, the bank said.
Figures from the National Statistics Institute (INE) released on Thursday show that retail sales declined for the 17th consecutive month in November. Sales dropped 7.2 percent following a 7.1-percent fall in October, the INE said. Economists were expecting a 7.4-percent drop.
Specifically, the central bank said Spanish companies were cutting spending and investing less in machinery and tools, while the construction sector weakened further with cement purchases also down. Exports, which has sustained the weak recovery of the economy during past three quarters, also showed signs of softening in October.
The news from the Bank of Spain was even grimmer for jobs. "The most recent monthly figures related to November point to a faster pace of job destruction in the fourth quarter of the year," the bank said.
Even in tourism — a once-positive indicator — there was "moderate" growth. In November, the number of tourists coming to Spain rose by 3.6 percent — down from eight percent in October — compared to the same month the previous year.
Last month, overnight stays by non-residents in Spain rose by six percent compared to November 2010. Tourism spending was reported on the rise by 8.4 percent for the first 10 months of the year, compared to the January-October period a year earlier, the Bank of Spain's report said.
On Monday, the new economy minister, avoiding using the word recession, said that "in all certainty in this quarter the Spanish economy has had a relapse and we will return to negative growth." A recession is commonly defined as two quarters of contracting activity in a row.
De Guindos predicted negative growth in the third quarter of the current year between 0.2 and 0.3 percent, warning that the economy will fail to make any advances in the first three months of 2012.
The new Popular Party government of Mariano Rajoy is expected to announce a series of long-awaited belt-tightening measures, including a possible string of budget cuts, when the Cabinet meets on Friday.
Rajoy has said he will slash Spain's deficit by at least 16.5 billion euros in 2012 through sweeping cuts, with only pensions escaping the knife, as well as pledging to clean up banks and reform the labor market.